Sundar and many of his executives have certainly read or heard of The Innovator's Dilemma, and I expect they're all moderately paranoid that it will be their downfall.

Also, that's not it. Google has a great ai app called Gemini where they have at various points hosted the top ai image generation model (certainly for speed, and for a while for accuracy) and have innovated with features like deep research

They are monetizing their ai conversations more effectively than OpenAI could dream of via ads and chat in Google search.

They are heavily investing in compute and talent.

When they've added llm results to Google search it has _increased_ engagement and re-engagement.

What part of the competition are they blissfully ignoring?

(I have counter arguments to some of these points, but I would rather hear other people's)

Google is well positioned to earn from this service, especially if they can prove that their search service is superior to competitors. While they lose some of their moat, they are well positioned to dominate the market, just like they did in the consumer space.

a bit more nuanced take on the failure would also account for executives backgrounds at the critical period:

- in 1981 Vince Barabba — Kodak's Head of Market Intelligence — conducted an extensive internal study that explicitly concluded digital photography could replace film and that Kodak had approximately 10 years to prepare for the transition.

- Kodak's leadership in 1980–1993 saw the company through the lens of its founding identity — silver-halide chemitry, precision coating and manufacturing, and the extraordinarily high margins of the film-plus-processing business. This identity-driven decade was spent on failed diversification and defending film instead of building an electronics cost structure and a defensible high-margin position. They steered capital and attention toward businesses that fit that self-image (specialty chemicals, pharmaceuticals, hybrid film products) rather than toward digital cameras, which meant fighting Sony and Canon on low-margin electronics turf where Kodak felt no competence and feared cannibalizing film.

- It was an inside executive culture, crystallized in the 1990 choice of film-lifer Kay Whitmore over the digital-minded Phil Samper. When Chandler retired, the finalists were Whitmore and vice-chairman Phil Samper, who had a deep appreciation for digital technology. The board chose Whitmore, and was explicit about why: as the New York Times reported, Whitmore said he would keep Kodak closer to its core businesses in film and photographic chemicals. Samper resigned and went on to become president of Sun Microsystems and then CEO of Cray Research — i.e., to lead exactly the kind of digital/computing companies Kodak was avoiding becoming.

- so when Kodak did get serious to compete in digital (in 1993 board made Fisher the CEO, he came from running Motorola and held an engineering degree plus a doctorate in applied mathematics) it did so as one commodity hardware maker among many and that was too late since film began to drop as digital started to pick up, exactly as Vince Barabba predicted in 1981

we started model testing the cost/performance of our skills and agents and flash 3.5 wins in most things.

As people develop harnesses for their codebase i think the intelligence required comes down a lot.

Google makes it very hard to use their shit and it was full of bugs.

Anthropic's current run is based entirely around Claude Code in this space and the last time I used the gemeini-cli it wouldnt give me access to the latest models and I was paying them for the privilege

Kiro is of course really good to back into AWS stuff, it knows more about AWS than Amazon themselves!

Gemini is really good at understanding my inane ramble and mis-spelling

I'm pretty sure they do. They already index metadata (you can see it in the web search results) so indexing the transcript is relatively easy.

I have a boss who loves to rattle on for ages, and it gives a breakdown of what on earth he was on about

cries in Google Glass

Wild that Meta has that product now decades later, which isn't even half of what Google offered.

How recently have you looked? I think nowadays it's quite good.

If i was a google cfo and was trading at a premium to my peers before that, i'd want to raise the cash now. Look at MSFT, they're trading at 25 forward p/e and were buying back shares at 40. If they have to issue equity over the next few years the spread between teh performance of the 2 cfos could be 40-50b on that alone.

Yes. Their competition is deploying debt and Google has low leverage. They also have $100+ billion cash on their balance sheet.

> Tech firms should always have a buffer and never get too close to the optimal debt ratio

...why is this especially applicable to tech firms? (Or a tech firm like Google?)

The risk if it doesn't work out is that everyone gets diluted 1.67%

In this statement, their 2025 capex was $91.45B. They expect their 2026 capex to be $180B-190B. And they expect their "2027 capital expenditures to significantly increase compared to 2026."

So they simply don't have the money. Up until now, I thought the bubble talks about AI were silly because all these companies were using cash flow to fund their capex. These numbers are so astronomical now that a company that had $132B in net income has to take debt or issue stock to pay for it.

In practice there's a lot of issues with asymmetric information. The company knows its own operations and financial position better than random traders on Wall Street. It is rational for it to buy back stock when the market value is lower than the true intrinsic value of the company, and to sell stock when the market value is higher than the true intrinsic value of the company. Therefore, traders often treat buybacks as a signal that the company is "cheap" (at least in the company's own view) and pump up the price accordingly, and treat stock issuances as a sign that company management believes that the stock is "expensive" and push it down accordingly. Company management has more inside information than market participants do, but is usually prohibited from trading on it. Stock issuances and stock buybacks are one of the few cases where insider-initiated trading is legal, because the benefits accrue to the company as a whole rather than a few individuals.

And in this specific case, selling shares to Berkshire at a 5% discount has a pretty clear signalling effect.

It's not based on the fundamental value of the stock so maybe you wouldn't consider it "first order," but I think you can still call it "mechanical."

Yes, but we are talking about liquidity not valuations...

1. There’s real profit/value expected in pursuing the full automation of the labor market to the extent that the Board will approve large debts to known allies (BH) who only invest in long term infrastructure.

So they are investing in more AI infrastructure with long term capital because they see the payoff in the long term.

2. That also means they aren’t doing market moving plays in public like selling corporate debt because they don’t want to be in the short term froth with a long term bet.

They are considered a very low risk and can borrow for a long time at low rates. They recently issued a 100 year bond.

They seem to have decided to issue equity rather than borrow more. This is probably so that they can maintain the ability to borrow very cheaply in future if necessary.

So I guess Google doesn’t think their stock is particularly cheap, but Berkshire Hathaway wants to buy more anyway. (At a slight discount.)

Semiconductor/ Big Oil/ Rail/ Telco have.